New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on December 18, 2006, representing the position of the New York State Insurance Department.

Re: § 3425(j)(1)(D) and a Private Right of Action

Question Presented:

Under Section 3425(j)(1)(D) of the Insurance Law, does a terminated agent or broker have a right to sue for commissions earned on policies continued after its contract with the insurer was terminated?

Conclusion:

Yes, nothing under Section 3425(j)(1)(D) of the Insurance Law prohibits a terminated agent or broker from suing for commissions earned on policies continued after its contract with the insurer was terminated.

Facts:

No specific fact pattern was presented.

Analysis:

N.Y. Ins. Law § 3425(j)(1) (McKinney Supp. 2006) states in relevant part:

Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:

(A) with respect to a personal lines insurance policy required to be continued by this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and any statutory extension and the insurer shall offer to continue the policy through the terminated agent or broker for at least its next one year policy period which commences within one year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account, and thereafter, at the specific request of the insured, shall offer to continue the policy through such terminated agent or broker for any remaining part of the required policy period including statutory extension;

(B) with respect to an automobile insurance policy subject to this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and, unless the policy is cancelled or non-renewed in accordance with the provisions of either subsection (b), (c) or (f) of this section, it shall, at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods which commence within the year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account;

(C) with respect to all new personal lines and automobile insurance business offered by such terminated agent or broker which is subject to the provisions of this section, the insurer shall accept all such business meeting the insurer's then current underwriting standards during the period of one hundred twenty days next following the date of mailing or delivery to the agent or broker of written notification of such termination;

(D) the terminated agent or broker shall be entitled to receive commissions on account of all business continued or written pursuant to this paragraph at the insurer's prevailing commission rate for such lines of insurance…

The intent of this section of law was to protect a producer’s right to receive commissions even after its contract with the insurer was terminated by the insurer. Although we are unaware of any cases addressing this issue, we believe that under Section 3425(j)(1)(D) of the Insurance Law, a terminated agent or broker may sue for his/her commissions.

For further information you may contact Senior Attorney Elizabeth Barrett at the New York City Office.